13.4% of Students Defaulted on Loans Within 3 Years of Repayment, U.S. Says

10/02/2012

More than one out of eight student-loan borrowers who entered repayment from October 1, 2008, to September 30, 2009, defaulted within three years, the U.S. Education Department announced on Friday as part of its first release of official data on cohort default rates for federal student loans measured over three years.

The new figure on overall default rates, 13.4 percent, was released as the department switches from measuring the rates over three years instead of two. For-profit institutions had the highest average three-year default rates, at 22.7 percent, which was more than double the 11-percent rate among public institutions. Private, nonprofit institutions had an average three-year default rate of 7.5 percent.

The department also announced that two institutions—the Centro de Estudios Multidisciplinarios, in San Juan, Puerto Rico, and Tidewater Tech, in Norfolk, Va.—faced possible sanctions for having two-year default rates of 25 percent or more. Unless they bring successful appeals, those institutions stand to lose their eligibility to participate in federal student-aid programs.

No institutions will face sanctions based on the new three-year rates until three years of data have been collected, though institutions with rates of 30 percent or higher must create a default-prevention task force and submit a management plan to the department.